Strategy is the logical next step after the materiality analysis.
The Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) will require many new companies to report on sustainability (→ prev. post: CSRD, EFRAG & ESRS – Frequently asked Questions Vol. 1). We introduce reporting topics and comment on how companies can comply and generate value out of those. We started with Materiality (→ prev. post: Materiality – Comply with CSRD and get sustainable). Let’s continue with Strategy.
Companies need to demonstrate to investors and stakeholders that they have a strategy on how to transform towards sustainability.
1️⃣ What is a strategy for sustainability
A strategy for sustainability is a structured plan of a company to transform into sustainability minimizing Risks and seizing Opportunities with positive Impact solutions.
2️⃣ Why a strategy for sustainability is important
Company and stakeholders need a clear plan to transform into sustainability. Without one, there is a high risk that the company will be out of business in a few years given fundamental sustainability challenges like the climate and fossil energy crisis or supply chain regulation.
3️⃣ What are the strategy reporting requirement
Companies need to report on their strategy with material matters, policies, Targets and Actions:
➡️ Material Action Areas:
the strategy is structured based on material ActionAreas with high company impact, risks and opportunities. Those are identified in the materiality analysis with pre-defined ESRS sector topics.
➡️ Policies and Targets:
the company defines policies and measurable targets by action areas, e.g. a climate 1.5° target or a human rights Policy for suppliers.
➡️ 𝗔𝗰𝘁𝗶𝗼𝗻𝘀 𝗮𝗻𝗱 𝗥𝗼𝗮𝗱𝗺𝗮𝗽:
actions are derived to comply with policies and to reach targets. These are Transformation projects, which are consolidated into a Roadmap with short-, mid- and long-term action.
➡️ Strategy Integration and Business Model: the Sustainability Strategy is integrated with the overall business strategy and the Business Model considering sustainability impacts, risks and opportunities.
4️⃣ How to do it
Strategy is the logical next step after the materiality analysis. Develop a strategy with your stakeholders like building a house with action areas as pillars and targets, policies and actions within. Implement immediately with short-term quick-win measures and review progress at least annually.
5️⃣ How to use strategy for value
Run an integrated strategy process to get ONE strategy for business and sustainability. Leverage sustainability to full extent in your business model, offerings to the market and for differentiation.
→ Mid-sized companies should not get lost in detail but start with the top 3 material action areas implementing initial actions, before broadening the strategy into more fields.